A New Social Contract

Context: India can achieve sustainable growth if government and industry work towards the same objective, of employment generation and in a spirit of mutual trust.

Pandemic Induced Economic Crisis

• Lost Livelihoods: An unplanned national lockdown halted economic activity and wiped out livelihoods, especially of informal workers (85%).
• Rise in unemployment: About 120 million people lost their jobs. - Centre for Monitoring Indian Economy
• Rise in reverse migration: Around 10 million people abandoned cities to return to their native villages. 

Structural Problems of Indian Economy

• Labour regulation: and stringent labour laws protecting only formal sector workers calls for a new social contract to define a well-calibrated social security system.

• Restricted Protection of Labour Laws : 

• Formal workforce/ labour aristocracy (15%): have complete protection, and employers have almost no flexibility.
• Informal workforce (85%): have no protection, and employers have almost complete flexibility.

• Living conditions in Indian cities: 
• Low Floor Space Index (FSI):

• New York and Hong Kong have an FSI five times Mumbai’s.
•  If five times as many people can live in the same area, it would drastically reduce rents for quality housing.

• Widening Rural-Urban Gap: 

• The gap between the richest (urban) and weakest (rural) districts in the country keeps growing, despite policies to attract investment in less-developed regions.

Way Forward

• Maintain Equity in Labour and Employment: 

• Everyone must have a minimum level of protection, and every employer a minimum level of flexibility. 
• Balanced and equitable employment system must be based on good faith and substantial leadership by industry, labour and government. 

• Efficient Management of Urban Cities: 

• Encourage the migration of people to higher productivity occupations in cities and ensure clean, affordable and accessible housing for all.
• Reverse migration is also an opportunity to collaborate in spreading the geography of development.

• Narrow Rural-Urban Gap:

• Increase farmer income by promoting value-added crops with excellent export potential

• Encourage agricultural exports 
• Permit contract farming and open up agricultural markets.

• Encourage agro-processing near the source: fostering entrepreneurship in rural and semi-urban areas would combine nicely with local processing.
• Invest in rural connectivity: add digital connectivity to road connectivity to level the playing field for all regardless of where they live.

Conclusion: Collaboration between all levels of government (Union, state, and city) and dynamic private sector can bring substantial and balanced economic progress. 

Quote:

Confucious is “may you live in interesting times”.